At today’s meeting, the NBS Executive Board voted to keep the key policy rate on hold, at 3.0%.

In making such a decision, the NBS Executive Board was primarily guided by the expected movement in inflation and its underlying factors going forward, and the effects of past monetary policy easing. According to the May projection, the Executive Board expects y-o-y inflation to gradually approach the target, after reaching this year’s low in April. Inflation should remain close to the lower bound of the target tolerance band by the end of this year, and should approach the target midpoint of 3.0% in the second half of 2019. Both the financial and corporate sectors expect one-year ahead inflation to be below the target midpoint, and two-year ahead inflation to be at the 3.0% target. That inflationary pressures are still low is also indicated by core inflation, which is at its lowest level since inflation has been measured by the consumer price index.

Uncertainty in the international commodity market, primarily in terms of movements in global oil prices, which continued up in 2018, still mandates caution in the conduct of monetary policy. However, according to futures and assessments by relevant international institutions, the period ahead is not likely to see it rise significantly, and even a decline in oil prices is projected over the medium term. Caution is also needed because of the increasingly diverging policies of the Federal Reserves and the European Central Bank, and heightened uncertainty in terms of the pace of their normalisation going forward. The NBS Executive Board pointed out that the resilience of the Serbian economy to potential adverse effects from the international environment has increased, owing to the reduction in internal and external imbalances and a more favourable macroeconomic outlook for the period ahead.

At today’s meeting, the NBS Executive Board adopted the May Inflation Report, which will be presented to the public on 17 May, when monetary policy decisions and the underlying macroeconomic developments will be discussed in more detail.